Small businesses are finding that more and more of their customers are shopping with debit cards and in many cases replaces cash; particularly with larger purchases.  This can be a problem for many smaller businesses.  However there are ways around this for some of the smaller businesses.
It can be quite confusing when setting up debit card payment terminals. There’s so many acronyms, fee structures and terminal types. It’s important to compare your options so that you’re getting paid fairly for accepting debit cards.

This is why we’ll explain the basics of debit card processing, the different types of debit card terminals, the fees and charges involved, and all the legal and security aspects of accepting debit cards. You’ll also get some tips on how to choose the best debit card solution for your business, and how to avoid common pitfalls and problems.

The basics of a point of sale (POS) debit card transaction

It all happens in the blink of an eye, but there’s a lot that goes on behind the scenes when someone buys something from you.

There’s three main steps.

1. The cardholder inserts, taps or swipes their debit card at the merchant terminal and chooses one of the three payment options: Cheque (CHQ), Savings (SAV) or Credit (CR). Cheque or Savings purchases will be processed through the EFTPOS system, which is a privately-run Australian debit card payment system that has been operating for almost four decades. Credit purchases will be processed through the Visa or Mastercard network, depending on the type of card.
2. The merchant terminal sends a request for authorisation to the cardholder’s bank via the chosen payment network. The request includes information such as the card number, expiry date, transaction amount and merchant details. The cardholder’s bank checks the validity of the card and the availability of funds in the account, and sends back a response to the merchant terminal via the same payment network. The response can be either approved or declined.
3. The merchant terminal displays the outcome of the authorisation request and prints a receipt for the cardholder. If the transaction is approved, the cardholder’s bank debits the transaction amount from the account and transfers it to the merchant’s bank, usually within one or two business days. The merchant’s bank then credits the transaction amount to the merchant’s account. If the transaction is declined, the cardholder may try another payment option or cancel the purchase.

The whole process only takes a few seconds but its crucial steps to whether you get paid or not.

What are the fees and charges involved

There are different types of fees and charges that you may encounter when setting up and using a POS machine. This will vary depending on the provider, the plan you choose, and the features that come with your plan. Some of the common fees and charges you’ll expect to pay are:

Setup fee
This is a one-off fee that you pay when you purchase or lease a POS machine from a provider. It will cover the cost of installing and configuring the device for your business.

Monthly fee
This is a recurring fee that you pay every month for using the POS machine and its services. It covers the cost of maintaining and updating the device, as well as providing customer support and technical assistance.

Transaction fee
This is a fee that you pay every time you process a transaction using the POS machine. It covers the cost of processing the payment and transferring the funds to your bank account. Some providers may charge a flat rate per transaction, while others may charge a percentage of the transaction amount.

There might be other fees that come with your POS machine that aren’t in the list above. Check the fine print of the T&C’s before you sign up to a plan to know exactly what you’ll be charged.

What are some of the EFTPOS machines available?

Almost every big bank will offer a EFTPOS terminal, they all aren’t created equal. Some are simple card readers while some will integrate with your online store to update inventory in real-time. Here’s some of the main ones you can consider comparing.

EFTPOS Terminal	Transaction Fee	Monthly Fee	Contract
Westpac Tap to Pay	1.4%	$0	No lock-in contract
Tyro	Custom rates based on monthly transaction volume	$0	No lock-in contract
Square	1.6% or 1.9%	$0	No lock-in contract
Commbank Smart Terminal	1.1% flat rate or custom pricing transaction fees	$29.50 per month terminal rental fee	No lock-in contract
Shopify Payments EFTPOS (Beta)	N/A	N/A	N/A
Zeller Terminal	1.4%	$0	No lock-in contract

There are other more expensive models out there that feature touchscreens, Xero & MYOB integrations and inventory management. But if you’re just looking to get setup and take payments, you may not need these full integrations.

Tips for choosing a payment processor

With the wide range of options out there, it doesn’t have to be overwhelming. Of course there’s many factors to consider. Here’s some things to consider when choosing a debit card processor.

Pay attention to the price
Compare the different solutions side by side and check their pricing plans. Do you want a flat-fee structure or a percentage of the sale amount. Keep a look out for any hidden fees.

Don’t pay for extras
If you don’t need inventory management, loyalty programs or online ordering, don’t pay for it. You know your business so choose only what you need.

Don’t forget about security
Make sure you choose a solution that offers a high level of security and compliance. You’ll need to make sure that what you choose has encryption that complies with the Payment Card Industry Data Security Standard (PCI DSS). You should also check that it offers fraud and chargeback protection.

Don’t forget customer service
Your EFTPOS terminal provide should provide reliable and responsive customer service. Look for a 24/7 service or at minimum, extended office hours.

Debit cards can be a very useful thing for shop keepers not simply because some customers are no longer used to carrying around a large amount of cash, but also because this will mean that people are more likely to both buy extra items and to buy larger quantities of the goods that were going to be bought so that the customer can get a discount.

So now you know the basics of debit card processing, the different types of debit cards and terminals, the fees and charges involved and the regulatory requirements, you’ll be able to make a better, informed decision for how your business takes payment.